10 - Stock Options and Warrants

9 Months Ended

Sep. 30, 2012

Stockholders' Equity Note Disclosure [Text Block]

10 — Stock Options and Warrants

2004 Stock Option Plan - Effective January 1, 2004, the Company’s Board of Directors adopted the 2004 Stock Option Plan for Directors, Officers, and Employees of and Consultants to InterMetro Communications, Inc. (the “2004 Plan”).  A total of 5,730,222 shares of the Company’s common stock had been reserved for issuance under the 2004 Plan. Upon shareholder ratification of the 2004 Plan pursuant to the definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on March 6, 2007, the Company froze any further grants of stock options under the 2004 Plan. Any shares reserved for issuance under the 2004 Plan that are not needed for outstanding options granted under that plan will be cancelled and returned to treasury shares.

The Company had granted a total of 5,714,819 stock options under the 2004 Plan to the officers, directors, and employees, and consultants of the Company, of which 308,077 expired in September 2007, an additional 523,734 expired during the year ended December 31, 2008 and 429,607 options expired subsequently.  In the three months ended March 31, 2008, the Company issued 1,143,165 shares of common stock on the cashless exercise of 1,232,320 stock purchase options.  The remaining 3,221,081 are fully vested at September 30, 2012 and were originally granted with exercise prices ranging from $0.04 to $0.97 per share.  On November 15, 2010, in order to provide continued economic incentive to option holders, most of whose options were issued at prices that were “out of the money”, the Board of Directors authorized a re-pricing of all the stock options under the 2004 Plan to $0.01, the closing price of the Company’s common stock on that day.

Omnibus Stock and Incentive Plan – Effective January 19, 2007, the Board of Directors approved the 2007 Omnibus Stock and Incentive Plan (the “2007 Plan”) for directors, officers, employees, and consultants. The shareholders ratified the 2007 Plan pursuant to the Schedule 14C Information Statement filed with the Securities and Exchange Commission which was declared effective on May 10, 2007.   Any employee or director of, or consultant for, the Company or any of the Company’s subsidiaries or other affiliates will be eligible to receive awards under the 2007 Plan. The Company has reserved 26,099,040 shares of common stock for awards under the 2007 Plan. The 2007 Plan specifically prohibits the re-pricing of any stock options awarded under this plan.

In November 2007, the Company granted 2,350,000 stock options to purchase shares of common stock under the 2007 Plan at an average exercise price of $0.25 per share to employees and directors. 1,095,000 of the shares granted were immediately vested at the date of grant. 1,050,000 of such options have expired as of September 30, 2012.  In October 2008, InterMetro granted 600,000 stock options to purchase shares of common stock under the 2007 Plan at an average exercise price of $0.25 per share to employees and directors. 30% vested at date of grant with the remaining vesting 1/12 per subsequent quarter over the succeeding 3 years expiring 5 years from date of grant.

On March 22, 2012, the Company granted 13,500,000 stock options to purchase shares of common stock under the 2007 Plan at an average exercise price of $0.04 per share to employees and directors. 6,750,000 of the options granted were immediately vested at the date of grant. The remaining 6,750,000 options vest 25% per quarter beginning with the quarter ending June 30, 2012.  The Company recognized $142,028 in compensation expense related to the immediate vesting of the stock option grants and an additional $35,000 and $71,000 in the three and nine months ended September 30, 2012, respectively. The remaining fair value is being recognized on a straight line basis over the vesting term. No options to purchase shares of common stock were granted under the 2007 plan in the nine months ended September 30, 2011.  As of September 30, 2012 none of the Company’s outstanding stock options under the 2007 Plan have been exercised.

The following presents a summary of activity under the Company’s 2004 and 2007 Plans for the nine months ended September 30, 2012 (unaudited):

	Number of Shares			Price per Share		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options outstanding at December 31, 2011		6,600,688		$	—	$	0.12		4.16	$	146,028
Granted		13,500,000		0.04 to 0.044			0.04
Exercised		—			—		—
Forfeited/expired		(1,479,607	)		—		0.18
Options outstanding at September 30, 2012		18,621,081		$		$	0.06		4.16	$	765,476
Options vested and expected to vest in the future at September 30, 2012		18,621,081		$		$	0.06		4.16	$	765,476
Options exercisable at September 30, 2012		15,246,081		$		$	0.06		4.08	$	630,476

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last day of the nine month period ended September 30, 2012 and the exercises price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2012. This amount changes based on the fair market value of the Company’s stock.  As of September 30, 2012 there remain 10,699,040 shares available for grant.

Additional information with respect to the outstanding options at September 30, 2012 is as follows:

		Options Outstanding						Options Exercisable
Exercise Prices		Number of Shares		Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$	0.01		1,049,141		1.25	$	0.01		1,049,141	$	0.01
	0.01		154,039		1.50		0.01		154,039		0.01
	0.01		431,307		1.75		0.01		431,307		0.01
	0.01		123,231		2.25		0.01		123,231		0.01
	0.01		277,269		3.00		0.01		277,269		0.01
	0.25		1,900,000		5.00		0.25		1,900,000		0.25
	0.04		13,500,000		4.50		0.04		10,125,000		0.04
	0.01		338,884		3.00		0.01		338,884		0.01
	0.01		643,880		3.25		0.01		643,880		0.01
	0.01		110,907		3.25		0.01		110,907		0.01
	0.01		92,423		3.50		0.01		92,423		0.01
			18,621,081						15,246,081

As of September 30, 2012, there was $71,521 of unrecognized compensation cost related to unvested share based compensation arrangements granted under the 2004 and 2007 option plans.  This cost will be amortized on a straight-line basis over the next two quarters.

Warrants – Historically, the Company has issued warrants to providers of equipment financing.  For a detailed description of the warrants issued in connection with equipment financing arrangements, see Note 4.

On April 30, 2008, the Company negotiated a revolving line of credit which allows the Company to borrow up to $2.4 million.  Warrants to purchase 14,233,503 shares of the Company’s common stock at an exercise price of $0.01 to $0.05 per share were granted in connection with securing and amending this credit facility.  See Note 11 for a detail of the warrants issued in connection with this credit facility.

The Company has issued warrants to its secured note holders in connection with the execution of the loan agreements and subsequent amendments.  Warrants to purchase an aggregate of 4,302,500 shares of the Company’s common stock with exercise prices ranging from $0.01 to $0.50 were outstanding with these note holders as of September 30, 2012 and December 31, 2011.  See Note 7 for further details of these warrants.